China and India ancient allies and modern competitors are rebuilding economic ties after five decades. Consequently the MNCs face the most challenging and rewarding business landscape ever.
The friends turned foes in 1962, decided to fight poverty rather than with each other. The result is joining of hands be it for UN permanent seat, negotiations in WTO or reopening of Nathu La, world’s highest trading post. Religion and culture further lubricate the wheels of commerce between India and China. Sino-Indian Camaraderie is evident from high level official visits, business people attending conferences and the flow of goods and services between them is likely to touch $30 billion soon.
Western Academicians and consultants are apprehensive about their budding business axis. They argue that whether it is political or commerce they are rivals at heart and view each other as aggressors. China’s impressive performance threatens India which trails in all socio-economic indicators. If china finds its strength in manufacturing and infrastructure, India finds it in technology and services. Both fiercely compete for natural resources. All these make one wonder if they are competitive or complementary.
Fathoming the Depth of their Relationship
With history repeating itself, the two most populous countries are likely to be the largest and the third largest economies by 2016 in terms of purchasing power and would account for 40% of world trade. With the integration of India and china into global economy the world’s future is certainly tied to India and china.
Both the countries keep their economic priorities on top and keep aside their border disputes. With their entry into global economy, they are gaining complementary strengths which can be tapped for global competitiveness. It has become imperative for all companies including MNCs to embrace their complementary nature.
The ties between these two countries had been as smooth as silk which is more than 2000 years old. In fact Buddhism travelled from India to China in 67 AD through the silk route. They had exchanged good will even in political issues till 1950s. By nature neighbours tend to trade more, and the bilateral trade is likely to touch $50 Billion by 2010. Sino-Indian trade has been more balanced than their trade with westerners.
Though cut-off in 1962, both have evolved differently in complementary but not in a competitive way. Chinese build manufacturing industries that leverage the superb infrastructure. Indian corporate choose those areas that deploy technically sophisticated English speaking graduates.
Getting the Best of Both Worlds
These complementary factors provide their corporate world opportunities and MNCs a threat. Indian companies can make use of China to make anything cheaply; China can turn to India to design and develop a product cost effectively, to market it and also to service the products. With the given market size of India and China, they are likely to be the market leaders.
Cooperating with each other
Corporate world have learnt to view them symbiotically. For example Mahindra & Mahindra has realized that making tractors in China is cheaper. M & M has found a good market in India as well as in China for its powered tractors. Further it is also catching up well amongst US hobby farmers.
Similarly China’s Huawei is leveraging India’s soft infrastructure to sustain its global edge against western giants. Huawei’s Bangalore centre is emerging as the second most important development centre earning the coveted “Capability maturity model Level 5” certification.
Experience of State owned Enterprises
State owned enterprises also learned to work together after paying a heavy price for it. Both being energy deficient countries, their companies search for equity oil. Their intense rivalry in acquisition of oil assets made them lose more. Having understood that joining hands would be fruitful both countries’ oil companies CNPC and ONGC have signed MOUs to bid together in acquiring oil assets. Of course this teaming up has a hidden agenda of preferential treatment for china in infrastructure related contracts.
Viewing the Two as One
Unfortunately many MNCs could not develop a joint strategy for India & China. These MNCs customised their business models to the local institutional content which makes synergising their subsidiaries in India & China difficult.
Approach of Mirosoft and GE
But shrewd GE and Microsoft proved other MNCs’ approach wrong by showing the way for skinning the proverbial cat. The best way to synergise is to focus hardware is china and software in India. GE exactly did this by creating software algorithms and scanner’s generator in Bangalore and hardware manufacturing in Beijing.
Microsoft uses its own innovative technique be it in launching of products or development of software. Microsoft, TCS and Chinese software park are collaborating for a banking application for the spiralling banking network of china. Similar project can be undertaken in India which is also endowed with a good network. MS also made a parity on country heads’ position in corporate hierarchy.
Instead of perceiving their rise as a threat, one has to recognise the complementarities and wrest competitive advantage from the elephants and dragons.